IPAA OGIS Florida February 2, 2012 Presentation (NYSE Amex: EPM) Evolution Petroleum Corporation 1
Forward Looking Statements and Cautionary Note The data contained in this presentation that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act. Such statements may relate to capital expenditures, drilling and exploitation activities, production efforts and sales volumes, proved, probable, and possible reserves, operating and administrative costs, future operating or financial results, cash flow and anticipated liquidity, business strategy, property acquisitions, and the availability of drilling rigs and other oil field equipment and services. These forward-looking statements are generally accompanied by words such as estimated, projected, potential, anticipated, forecasted or other words that convey the uncertainty of future events or outcomes. Although we believe the expectations and forecasts reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. These statements are based on our current plans and assumptions and are subject to a number of risks and uncertainties as further outlined in our most recent 10-K and 10-Q. Therefore, the actual results may differ materially from the expectations, estimates or assumptions expressed in or implied by any forward-looking statement made by or on behalf of the Company. Cautionary Note to U.S. Investors The SEC has recently modified its rules regarding oil and gas reserve information that may be included in filings with the SEC. The newly applicable rules allow oil and gas companies to disclose not only proved reserves, but also probable and possible reserves that meet the SEC s definitions of such terms. We disclose proved, probable and possible reserves in our filings with the SEC. Our reserves as of June 30, 2011 were estimated by DeGolyer & MacNaughton, W.D Von Gonten & Co. ( Von Gonten ), and Lee Keeling and Associates, Inc. ( Keeling ), independent petroleum engineering firms. In this presentation, we make reference to probable reserves. These estimates are by their nature more speculative than estimates of proved reserves and are subject to greater uncertainties, and accordingly the likelihood of recovering those reserves is subject to substantially greater risk. 2
Our Business EPM generates, acquires and implements domestic, onshore oil development projects utilizing our expertise and modern technology. Our business model is focused on building value per share by: Identifying development projects Capturing project value without overpaying Initiating development to reduce risk Utilizing our internal cash flow to finance widespread development without cross-collateralization risk or undue share dilution Our projects are: Oily Lower risk development Engineering-based Within existing fields 3
Quick Facts about EPM Ticker Symbols Common EPM (NYSE AMEX) Perpetual Preferred EPM-PA (NYSE AMEX) Fiscal Year-end June 30 Market Cap* $279 MM, as of 1/30/12 ($8.92/share, fully diluted shares) Enterprise Value* $272 MM, based on balance sheet of 9/30/11 Common Stock 27.7 MM shares outstanding as of 9/30/11 33.2 MM shares fully diluted* Financial Strength Team Record No debt Positive returns on invested capital since formation * Total awarded options and warrants are 5.5 MM with $1.86 average exercise price. Enterprise value includes effect of 8.5% nonconvertible perpetual preferred stock outstanding as of 9/30/11. 4
Moving into 3 rd Phase of Our Growth Acquired & farmed-out Delhi & initiated EOR project - Negative cash flow & no earnings Delhi net proceeds re-invested to acquire & test shale gas, Giddings and South TX oil projects Breakeven cash flow & no earnings Delhi & Giddings cash flows redeploying into development of oil projects and GARP technology Growing operating cash flow & earnings 5
Oil & Gas Core Assets (Net Reserves at 6/30/2011) Delhi Field - producing CO 2 EOR - 100% oil 10.9 MMBO Proved 5.8 MMBO Probable 41% of 2P is devel d producing S Lopez Field producing Vertical redevelopment of previous waterflood 100% oil Giddings Field producing Horizontal wells in naturally fractured Austin Chalk, Georgetown, Buda plus Woodbine potential. 2.7 MMBOE Proved, 15% developed & 47% oil & NGL 6
EPM Valuation Metrics Oil and gas reserves (as of 6/30/2011) Proved: 13.8 MMBOE 84% oil 39% developed Probable: 6.2 MMBOE 100% oil 31% developed Valuation Metrics * Net Future PV10 PV10 per Capex (in PV10) (net of capex) diluted share per BOE Proved Producing $201 MM $ 6.05 $ 0.28 Proved Undeveloped $175 MM $ 5.27 $ 4.59 Probable Producing $ 34 MM $ 1.02 $ 0.00 Probable Undeveloped $ 42 MM $ 1.26 $ 5.09 Delhi oil sells at LLS now $114+ $451 MM $13.58 $ 3.12 PV10 from independent reserve engineers - DeGolyer & MacNaughton, W.D Von Gonten & Keeling based on SEC pricing as of 6/30/2011 ($94.81/bbl Louisiana Light Sweet oil at Delhi). PV10 metric is a valuation tool, net of future capex, and may differ materially from market value. Diluted share metric includes 5.5 MM options & warrants without netting or inclusion of exercise proceeds. Numbers may not add due to rounding. 7
EPM is Undervalued Relative to Peers 3.5 3.0 2.5 2.0 1.5 1.0 0.5 EPM vs Peers (as of 01/30/2012) Enterprise Value as % Proved PV10 0.0 EPM WRES REN RAM DNR PQ MHR Price Wtd Diluted Shares Mkt Cap Enterprise Value Proved Reserves SEC PV 10 Oil & NGLs Proved Developed Reserves Valuation mm $ mm $ mm MMBOE $ mm % % P/PV10 EV/PV10 EPM 8.92 31.3 279.2 272.0 13.8 375.4 89.0% 39.0% 0.74 0.72 WRES 3.51 72.0 252.5 263.2 21.6 287.6 47.4% 73.0% 0.88 0.92 REN 11.1 64.0 710.8 856.2 64.7 848.0 89.8% 53.0% 0.84 1.01 RAM 3.73 79.1 295.0 494.9 24.4 364.2 54.0% 62.0% 0.81 1.36 DNR 18.75 403.3 7,562.1 9,942.4 379.9 7,292.3 85.0% 60.0% 1.04 1.36 PQ 6.35 62.4 396.3 525.1 32.1 256.0 31.1% 65.0% 1.55 2.05 MHR 5.75 131.1 753.7 1,130.5 31.2 428.0 55.0% 50.0% 1.76 2.64 AREX 33.95 28.7 972.7 1,094.0 50.7 325.8 51.0% 50.9% 2.99 3.36 8
Why Own EPM Now? Proved PV10 of $375 MM (13% recovery) compared with enterprise value of $272 MM Growing value and cash flow at Delhi: Net oil production growing up 48% in fiscal Q1-12 from Fiscal Q4-11 to 326 bopd from early development Production expected to grow substantially and peak ~2016 FY2012 pretax cash flow per share from Delhi project alone projected to increase by up to 3 multiple of FY2011, based on 6/30/11 reserves report Reversionary working interest payout projected to occur at year-end 2013; EPM gains 23.9% WI and 19% RI at payout. No capital expenditures projected until calendar 2014 until then, 100% of our Delhi after-tax proceeds can be redeployed into other EPM projects. Delhi oil selling at ~$10 premium to WTI, or $19 greater than 6/30/11 SEC price 9
EPM s Core Asset Delhi Holt Bryant Unit CO 2 Based Enhanced Oil Recovery Project 10
EOR - Delhi Field CO 2 Project Gross Historical Production 192 MMBO PV10 Projected EOR Recovery, 13% Proved $334 MM % of original oil in place (OOIP) 4% Probable $ 73 MM Unit Size 13,636 acres Delhi Jackson Dome Acquired by EPM in 2003 Paid $2.7 mil + spent $2.5 mil in field Acquired royalty in 2006 Paid $1.5 mil Farm-out to DNR in 2006 Received $50 mil cash + development of EOR project + reversionary interest Upside Potential More original-oil-in-place Higher EOR % recovery similar to other DNR projects Utilization of lower cost (CO 2 + water) injection process 11
EPM s Delhi Farm-out Agreement We own royalty interests equal to ~7.4% of gross production EPM receives 7.4% of gross revenues from day one EPM pays no capital expenditures and no operating costs, ever Project is exempt from state severance tax until project payout, subject to oil price & rates Royalty interest = 30% of our total Delhi reserves volumes Delhi crude priced at Louisiana Light Sweet Oil price, which currently tracks Brent Oil price (imported oil) we realize a substantial premium compared to WTI oil price We also own a 23.9% reversionary working interest (~19% revenue interest) Calendar YE 2013 defined Payout = projected net field cumulative cash flow of $200 million Net field cash flow = revenue minus field operating expense (including CO 2 ) After Payout, EPM will bear its pro rata share of capital expenditures & expenses and will own pro rata share of field assets and reserves including injected CO 2 EPM projected to bear net $12.7 MM total capex for proved reserves following Payout Reversionary interests are in addition to above royalty interests 12
EPM Assets: Delhi CO 2 EOR Project Progress Delhi Holt-Bryant Unit Production, Gross Barrels of Oil Per Day 100,000 10,000 Field Installation 1,000 100 Oil Response 10 1 EPM buys Delhi Farmout to DNR CO2 Injection Begins 13
Significant Cash Flow Growth from Delhi millions per year $80 EPM's Projected Annual Pretax Net Cashflows from Delhi Royalty Reversionary WI $70 $60 $50 $40 $30 $20 $10 $- $(10) Calendar Note: Based on report from independent reserve engineers, DeGolyer & MacNaughton, and includes proved and probable reserves as of 6/30/2011 at SEC pricing of $94.81/bbl. Diluted share count includes 5.5 MM options and warrants without effect of exercise proceeds. 14
Delhi Present Value Increases Over Time Notes: Residual PV10 is the PV10 of remaining cash flows from given year to project end. Includes proved and probable reserves from independent report of 6/30/2011 at SEC pricing of $94.81/bbl. Diluted share count includes 5.5 MM options and warrants without effect of exercise proceeds. 15
Delhi PV10 Sensitivity to Price & Recovery Ultimate EOR Recovery Impact on EPM Share Price Oil Price Impact on EPM Share Price $/ diluted share $14 $13 PV10* vs Gross Oil Recovery (flat pricing) 2P $ / diluted share $20 $16 PV10* vs 2011 Oil Price 2P PV10 Esc @ 3% inflation 2P PV10 SEC Flat $12 $12 $11 $10 $9 1P $8 $4 Recent EPM stock & Delhi oil price $8 40 50 60 70 80 Gross Recovery in MMBO $- $- $20 $40 $60 $80 $100 2011 Oil Price * From independent report of 6/30/2011 including proved and probable reserves at SEC pricing of $94.81/bbl. Escalated pricing analysis begins with 6/30/11 SEC price. Diluted shares include 5.5 MM options and warrants without effect of exercise proceeds. 16
Positioning for Growth Track Record for Project Development & Near Term Operating Plan 17
Successful Team Track Record (through 6/30/2011) $8.3 MM of common equity invested Generated $66 MM in cash + Proved PV10 value of $375 MM Delhi EOR Giddings S Texas OK $ 6.8 MM $28 MM $ 2.1 MM $ 7.7 MM $50 MM cash price + $5 MM cash from opns, pretax + Proved PV10 = $334 million Probable PV10 = $ 72 million $11.4 MM pretax cash from field + Proved PV10 = $ 41 million Proved PV10 = $ 0.5 million + 40 additional drilling locations & expansion Development impacted by natural gas prices GARP tm technology $ 0.2 MM Patented, first field tests successful, 2 JVs on going 18
Oil Reserves Development in S. Texas 100% WI in 3 leases within Lopez Field in Webb County, Tx Field historically produced ~32 MMBO from primary and secondary recovery EPM initiated testing in calendar 2010. Delay in obtaining water injection permits and well re-entry issues resulted in subsequent, temporary de-emphasis Our fiscal 2011 program confirmed commercial oil production at high fluid rate in producing test well, reconfirming original expectation of significant oil potential Leasehold provides for 40 drilling locations independent reserves report includes 2P reserves of 440 MBO and PV10 of $4 MM based on low fluid rate well development Have drilled 2 producers and 2 injectors to date in Fiscal 2012 Plan and currently putting on production while working on water injection wells Potential is in expanding and extending development 19
GARP TM Patented Artificial Lift Technology Our Technology Gas Assisted Rod Pump Mobilizes remaining fluid to the pump Cost $75K - $150K per application Successfully applied in own wells in Giddings Field Installed in one commercial venture, installing in second versus: FLUID LEVEL AT ROD PUMP P&A INCREMENTAL RESERVES FROM GARP FLUID LEVEL AT GARP P&A RESERVOIR Conventional Artificial Lift Either fluid level eventually drops to a level where rod pump or gas lift are no longer effective, or Fluid production in gas well builds and eventually shuts off gas production This can leave substantial volumes of oil and gas unrecovered. 20
Giddings Field, Central Texas Attractive Drilling Economics (as of 6/30/11) Drilling locations Avg. Gross 2P Recovery Avg. cost/well Cost per net BOE 10 proved re-entries 183 MBOE/well $1.5 MM $10.25 3 proved grassroot 352 MBOE/well $3.0 MM $10.65 Naturally fractured Austin Chalk, Georgetown & Buda no hydraulic fracs required Wells typically produce at high initial rates with steep initial decline, then stabilize. About half of estimated reserves are produced in first two years PUD reserves estimated to be 21% oil, 26% gas liquids and 52% natural gas 100% WI (~80% NRI) in 10 producers and 12 drilling locations 20% WI-BPO & 38% WI-APO (16-30% NRI) in 3 producing wells and 1 re-entry location Changes in portfolio since 6/30/2011: o o one of the proved re-entries has been contributed in exchange for a 15% interest in a higher potential location remaining proved portfolio is 6 re-entries and 4 grassroots. 21
Operating Plan & Catalysts for Fiscal 2012 $5 million base plan to: Resume development of Lopez Field oil project in South Texas 3rd party demonstrations of GARP tm artificial lift technology Continue development in Giddings through industry JV Up to $10+ million expansion potential for: Funding: Expanded development of Lopez Field - pending Expansion into new oil project Opportunities in market due to volatility, including stock repurchases Current working capital and projected operating cash flows sufficient to meet expanded plan; can be supplemented as necessary by project financing, divestments of noncore assets, perpetual preferred stock sales and other for further expansion of projects. 22
Results Our historical record speaks for itself 23
EPM Growth Record Since Inception Net Reserves in MMBOE Revenues in (000) 25 $8,000 20 $7,000 $6,000 15 $5,000 10 $4,000 $3,000 5 $2,000 $1,000 0 2004 2005 2006 2007 2008 2009 2010 2011 $0 2004 2005 2006 2007 2008 2009 2010 2011 Proved developed Proved undeveloped Probable Reserves and Annual Revenues as of June 30 2009 downward revisions primarily due to commodity prices 24
Growth in Revenue and Net Income Trailing 12 Month Quarterly Revenue Trailing 12 Month Quarterly Net Income $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $1,200 $1,000 $800 $600 $400 $200 $0 -$200 -$400 Q2-11 Q3-11 Q4-11 Q1-12 -$600 2Q-11 3Q-11 4Q-11 1Q-12 25
In Summary - Why own EPM? Proved PV10 of $375 MM at 6/30/11 versus current enterprise value of $272 MM Growing value and cash flow at Delhi, a 100% oil project Outstanding upside at Delhi o o Currently netting $19/bbl more than in 6/30/2011 reserves report Probable PV10 of $73 MM (increases recovery from Proved 13% to 17% total) o Recovery potentially >17% o o Reservoir may be larger than originally estimated Conversion to water re-injection that reduces CO 2 purchases Redeploying cash flow to develop upside potential in other oil projects and our patented artificial lift technology No debt and good liquidity Employees fully aligned with shareholders by beneficially owning 19% of fully diluted shares and focused on building value per share 26
Exhibits Definitions Abbreviated Balance Sheet Management Team Board of Directors 27
Definitions EOR BOE CF M MM NGL PUD PbDP PV10 SEC Reserves Futures Reserves PV10 Futures PV10 Flat PV10 Esc FD Share Enhanced oil recovery Barrel of oil equivalent Cubic feet of natural gas at standard conditions Thousands Millions Natural gas liquids Proved undeveloped Probable developed producing reserves are additional recovery to PDP Future unescalated pretax net cash flows discounted at 10% per annum based on SEC pricing (trailing twelve months realized prices) Reserves based on unescalated trailing twelve month realized prices Reserves based on five year forward futures commodity prices with subsequent years held constant at the fifth year prices PV10 adjusted for Futures Reserves PV10 adjusted to given commodity prices without escalation PV10 adjusted to given commodity prices with price & cost escalation Fully Diluted Shares includes outstanding shares + unvested options & warrants, without considering the weighted average exercise price of $1.83 Cautionary Note: PV-10 is a commonly used financial metric and does not necessarily equal market value. All Reserves are unrisked, and SEC Reserves unless otherwise noted. 28
EPM Liquidity 9/30/2011 Assets Current Assets $ 14,171,000 Properties & Equipment, net 33,636,000 Other Assets 91,000 Total Assets $47,899,000 Long Term Liabilities & Equity Long Term Debt $ 0 Current Liabilities 2,015,000 Other Liabilities (primarily deferred income tax) 4,932,000 Total Liabilities 6,947,000 Equity $40,952,000 29
Our Management Team Robert Herlin, CEO & Chairman Co-founded EPM in 2003 and built company using $8.3 million of equity capital 28 years of leadership experience in M&A, development, operations and finance in public and private sectors $800 million in transactions completed Originated and led horizontal drilling team in early years of horizontal drilling adoption by industry Former Member of Board of Directors Boots & Coots B.S. and M.E. in chemical engineering (Rice University) and MBA (Harvard) Sterling McDonald, CFO CFO since 2003 Former CFO for PetroAmerican Services, PetroStar Energy and Treasurer for Reading & Bates Corporation Responsible for raising ~$4 billion in capital B.S. and MBA (University of Tulsa) 30
Our Management Team Daryl Mazzanti, VP-Operations Joined team in mid-2005; 25 years of experience in oil & gas industry Former Manager of US Business Development for Anadarko Former Production Manager, Austin Chalk for Anadarko/UPRC responsible for 1200 wells, staff of 65 and 25,000 BOEPD of production Responsible for numerous innovations in horizontal drilling, completions and artificial lift B.S. in Petroleum Engineering (University of Oklahoma) Edward Schell, General Manager for Drilling and Unconventional Development Joined team in late 2006; 28 years of experience in oil and gas industry Various management positions in drilling, operations and business development at Anadarko Petroleum Particular expertise in horizontal drilling and tight gas reservoirs Drilled ~800 wells, 200 being horizontal and 2/3rds being in unconventional reservoirs B.S. in Petroleum Engineering (University of Texas) 31
Our Board of Directors Robert Herlin, CEO, Chairman & Co-founder Laird Cagan, Director & Co-founder Managing Director Cagan McAfee Capital Partners Formerly with Goldman Sachs and Drexel Burnham Lambert E.J. DiPaolo, Director Energy Partner with Growth Capital Partners, L.P. Former Halliburton Group Senior Vice President of Global Business Development Gene Stoever, Director Retired Partner with KPMG Peat Marwick Former SEC Reviewing Partner for KPMG CPA in the State of Texas and member of the AICPA Bill Dozier, Director Former SVP-Business Development for Vintage Petroleum Former SVP-Operations for Vintage Petroleum Formerly in operations for Santa Fe Minerals and Amoco Kelly W. Loyd, Director Director with JVL Advisors, LLC, a private energy investment company Formerly Associate with RBC Capital markets Formerly Founder of L.A.B. sports and Entertainment and Managing Partner of Tigre Leasing, LLP 32
(NYSE AMEX: EPM) Company Contact: Sterling McDonald, VP & CFO (713) 935-0122 smcdonald@evolutionpetroleum.com IR Contact: Lisa Elliott / lelliott@drg-e.com Jack Lascar / jlascar@drg-e.com DRG&E / 713-529-6600 33